Weekend Reading: Nobel Prize Edition

One of the most influential books I’ve ever read was Nudge by behavioural economist Richard Thaler and Cass Sunstein. The book is all about subtlety or gently steering people into making better choices to improve their health, wealth, and happiness. Policymakers around the world caught on to his groundbreaking research, which have been widely applied by business and government to get individuals to do a range of actions such as saving for retirement, paying parking tickets, and getting flu shots.

That’s why it was satisfying to see Thaler recognized as the winner of this year’s Nobel Prize in Economic Science. It’s a controversial choice because traditional economists operate on the theory that everyone is rational, while Thaler and others in his field use psychological research to argue that humans are quite irrational when it comes to the decisions we make.

“For some in the profession, the idea that psychological research should even be part of economics has generated hostility for years.”

Asked how he would spend the prize money of about $1.1 million, Professor Thaler replied, “This is quite a funny question.” He added, “I will try to spend it as irrationally as possible.”

The latest Canadian Couch Potato podcast is a good one, as Dan interviews Mike Foy from J.D. Power about the Canadian Self-Directed Investor Satisfaction Survey. The podcast goes on to tackle a question from a newbie investor who’s having trouble coping with a 2% loss in his index fund portfolio over the last six months.